Paddy Power Betfair is trading neck and neck with analysts’ expectations
Bookmaker Paddy Power Betfair saw its share price fall despite trading in line with expectations last year, underscoring perceptions that investors expect it to perform more strongly for the stock price.
It highlighted an increase in underlying earnings of over a third to £400m as well as a significant dividend payment.
The figures
Revenues are up 18 per cent to £1.5bn with underlying earnings increasing to £400m, a 35 per cent increase on the same period last year, in line with expectations.
The company said its sportsbook stakes in the year to date were up 22 per cent, with online up 13 per cent, Australia up 47 per cent and retail up 15 per cent.
A final dividend of 113p per share has been announced, which results in total dividends for the year of 165p per share.
The share price has fallen 5 per cent since the market opened this morning.
Paddy Power Betfair share price
Paddy Power share price has taken a stumble as investors demand outperformance
Why it's interesting
The company is now a much bigger enterprise, following the merger of Paddy Power and Betfair, creating a £7bn FTSE 100 gambling group.
However, the bookmaker said that the first quarter saw a high number of favourites won at the popular horse races known as the Cheltenham festival, meaning the company suffered higher losses as more punters won bets.
Charles Stanley Chief Markets Commentator, Gary White said:
Paddy Power Betfair trades on a high earnings multiple, so any disappointment in its results is likely to be punished hard. Its results weren’t too out of kilter with City expectations, but when a company is valued so richly it needs to deliver outperformance to justify its high rating.
There was good news on cost synergies from the merger, but football results in December and the outcome of racing at Cheltenham hitting profits. The results can therefore only be described as mixed.
What Paddy Power Betfair said
Paddy Power Betfair Chief Executive, Breon Corcoran, said:
2016 was a transformational year for Paddy Power Betfair with much of the integration of the businesses completed sooner and more efficiently than expected.
“The integration of our technology platforms is on track and customers are already seeing some benefits, including more markets and better odds.
In short
Paddy Power Betfair is trading in line with expectations but the current share price sharpens investors focus on expectations of outperformance.